O'Leary v. Humana Insurance Company

District Court, E.D. Wisconsin·Decided November 30, 2020·No. 1:17-cv-01774·Unknown

Opinion

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF WISCONSIN

CAROLYN J. O’LEARY, individually and on behalf of all others similarly situated,

Plaintiff,

v. Case No. 17-C-1774

HUMANA INSURANCE COMPANY, et al.,

Defendants.

DECISION AND ORDER

Plaintiff Carolyn J. O’Leary, individually and on behalf of all others similarly situated, commenced this action under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (FLSA), against Defendants Humana Insurance Company and Humana Inc. (collectively, Humana) on December 20, 2017. Before the court are Humana’s request for relief (Dkt. No. 157) and Plaintiffs’ motion for sanctions (Dkt. No. 165). For the following reasons, Humana’s request for relief will be granted and Plaintiffs’ motion for sanctions will be partially granted as provided herein. BACKGROUND Plaintiff O’Leary alleges that Humana operated a willful scheme to deprive its clinical nurse advisors and other similarly-situated employees of overtime compensation. This was accomplished, according to the complaint, by improperly classifying these employees as exempt under the FLSA and paying them a straight salary with no overtime, as opposed to hourly wages with overtime paid at the rate of one-and-a-half times the regular hourly rate. As a result of the alleged misclassification, O’Leary claims that she and other similarly-situated employees were required to work more than forty hours per week without overtime pay. Humana has since reclassified the clinical nurse advisors and similar employees as nonexempt and now pays them hourly wages and overtime. Humana contends that the change in classification was for business reasons, however, and not because Humana believed it was in violation of the FLSA. Nevertheless, the parties stipulated in June 2018 to conditionally certify a

collective action under § 16(b) of the FLSA, 29 U.S.C. § 216(b), and an agreed-upon notice was sent out to persons who, in the three years prior to the commencement of the action, had worked for Humana in the roles of Clinical Intake, Clinical Claims Review, Acute Case Managers, or Market Clinical – Senior Products utilization management nurses and had been classified as exempt. Since that time, the parties have repeatedly clashed over discovery, resulting in a series of motions to compel and other discovery-related motions and culminating in the present motion for sanctions. The discovery dispute centers on the question of damages. Because the Plaintiff employees were salaried, accurate records of their time at work were not maintained. Plaintiffs have sought to determine the time they spent at work through the computer systems they used to perform their

duties and record their activities. Different systems were utilized by Humana at different times for different employees, and Plaintiffs’ efforts to obtain the data needed to establish their time at work has resulted in some of the discovery disputes. Another area of dispute is over Humana’s policy and practice of paying the Plaintiff employees for additional work. Humana contends that it had an understanding with its clinical nurse advisors and similarly-situated employees that the salary they were paid was intended as full compensation for all of the hours worked, whether that number exceeded forty or not. If true, then in the event the employees are ultimately found to have been improperly classified as exempt, their unpaid overtime would be calculated by dividing their weekly salary by the total hours they worked in that week, and adding 0.5 of that amount for each hour over the regular forty-hour workweek for which they were entitled to overtime. If, on the other hand, the salary was intended to compensate the employees for only forty hours a week or less, the salary is divided by the hours of work the salary was intended to cover to determine the employee’s regular pay, and any hours

worked in excess of a forty-hour workweek would be paid at a rate of one-and-a-half times the regular rate. 29 C.F.R. § 778.114; Urnikis-Negro v. Am. Family Prop. Servs., 616 F.3d 665, 679– 80 (7th Cir. 2010). Plaintiffs contend that the salaries they were paid were intended to cover only forty hours, and they are thus entitled to the higher damage calculation. The issue is significant, representing as much as 70% of the damages Plaintiffs seek. The court has held several hearings, by telephone and in person, in an attempt to resolve the discovery issues. Before the motion for sanctions was filed, the court conducted a hearing on August 14, 2019 (the August 2019 hearing), to discuss some of these ongoing discovery issues. Following the hearing, the court entered an order on September 10, 2019 (the Discovery Order) regarding Plaintiffs’ renewed and second motions to compel discovery. Dkt. No. 154. In this

order, the court directed Humana to produce several categories of documents that had been requested by Plaintiffs. With respect to three document requests—Requests for Production Nos. 17(c), 36, and 37—the court allowed Humana thirty (30) days to present evidence that a response to these requests would be burdensome. Id. at 3. Humana filed such a request, claiming that the court’s Discovery Order imposed a severe burden on Humana and requesting relief (Request for Relief) from the discovery production the court had directed. Dkt. No. 157. Specifically, Humana requested complete relief from paragraphs 3(c) and 4 of the Discovery Order, explaining that literal compliance was not possible or proportionate to the litigation matter. Humana also requested additional time from the court to comply with paragraphs 3(a) and 3(b) of the Discovery Order. Plaintiffs opposed these requests and subsequently filed a motion seeking sanctions against Humana for its repeated discovery violations (Dkt. No. 165). Plaintiffs assert that Humana made repeated false statements about material facts regarding extra compensation paid to class members (Collective Members) of Plaintiffs’ lawsuit and concerning policies about extra compensation

maintained by Humana. Dkt. No. 166 at 3. These statements, as noted above, are significant because they pertain to facts that could materially impact damage calculations (up to 70% of the damages, according to Plaintiffs interpretation of the controlling case law). See id. at 5. Plaintiffs argue that Humana failed to meet the court’s stated burdensome standard by not explaining how the Discovery Order placed Humana in an “unusual circumstance” relative to other companies. Id. To sanction Humana for its conduct, Plaintiffs asked that the court: 1. Take as established for purposes of the action that all payments and offers of payments of extra compensation to Collective Members were made for performing work at particular times or for particular lengths of time and not for being on an on-call status.

2. Prohibit Humana from supporting or opposing any issue related to “extra compensation” through testimony or sworn statements, given that Humana’s witnesses have been proven to be unreliable on this issue. Any evidence Humana wants to offer on this issue must come from documents created in the regular course of business.

3. Deny Humana’s Request for Relief, Dkt. No. 157, given that Humana’s falsification of the facts surrounding extra compensation makes it vitally important that Plaintiffs receive documents for every Collective Member.

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